UKC

Which are you? Personally I find the argument that people won't bother if they're only getting 50p out of every pound they earn, rather than 60p, rather weak.

In reply to wayno265: I don't think it's that they won't bother more a case of they will bother but somewhere else. Perhaps not quite as weak an argument when you consider the number of 50p's that may be involved. For me it's a bit like the banking bail out. I disagreed with that at an emotional level but I can see why it was done.

Al

In reply to wayno265:

It's certainly not great that the UK is now seen as one of the highest taxed economies in the world. That's hardly an incentive for people to bring their money to the UK, never mind whether those that are able to do so leaving.

I think it is partly psychological but it isn't helping the economy grow and I think it should go as fast as they can find a way to do so. It's clear the Tories would do so if it they were able to, politically that is.

I am speaking from a professional perspective rather than a personal one as I deal with the tax affairs of people investing in the UK (from within and outside).

In reply to wayno265: i'd like to see it back to 83%

In reply to wayno265:



Yep and I imagine that if you're on £150k you:-

a: Work f*cking hard.
b: Have private healthcare i.e. no NHS
c: Have kids in private school
d: Pay a f*cking fortune in VAT.

So part of me thinks it's not fair but as it only affects 355,000 people IIRC it's open to debate how much it actually brings in.

We need tax-cuts for single, hardworking middle-earners like myself who don't use the NHS/pay for other peoples tax-credits/scrounger benefits bill but at the same how much would each of us get if we transferred the money gained from 50p rate to the rest of us.

In reply to Sam_in_Leeds:

The two biggest government expenditures are the NHS and pensions. Your argument seems to be that if don't use the NHS at the moment you shouldn't pay for it. This argument is strange, do you do understand the concept of insurance?

In reply to Sam_in_Leeds:

So you're £150k paragon of virtue, who works much harder than a cleaner or a factory worker, is driving down the road (paid for by the public purse) to his factory (which is staffed by people making money for him/her who were educated by the state, and rely on the NHS to restore their health when they're ill) when he or she has a car crash and is severely injured.

Which private healthcare provider is going to send an ambulance to collect them? Which private police service is going to make the road safe? Which private critical care unit is going to keep them alive?

It's interesting that you've identified yourself as the person most deserving of assistance.

In reply to wayno265:

Well, yes, that is a very weak argument, mainly because the 50% tax rate isn't the same as going from 60p to 50p in the pound. It is going from 60p to 50p in the pound above a certain income threshold, so not for every pound.

In reply to wilding:

I made sure I have private health insurance as part of my contract at work and I also made sure that age 18 when I started paying NI I contracted out pretty quickly!

I don't trust the government to provide anything for me...

In reply to JonC:

Is "now seen as" the same as "is"? I tried to find out but the latest info I could find was from 2005.


I know the square root of sod all about economics, but it's clear to me that it's largely about mass psychology. I think more damaging than the 50p tax rate is the fear that many people feel about their continuing employment, and the severe squeeze on their current finances, which makes them not want to spend money, thereby shrinking the economy.

In reply to nickinscottishmountains:

I'm aware of that.

In reply to wayno265:

In my experience, the high earners have kind of gotten used to the concept of 50% tax. They don't like it, but they're living with it.

As to the middle income earners who feel taxed to the hilt and don't use many gov't services, I don't actually buy that either. All of use them at some point and you sort of pay for the servuces you use at either ends of your life in your mid life.

I would repeat my point that the biggest damage I think the 50% rate is doing to us (and not just that but other tax mesures) is that we are not attracting inward investment, or indeed incentivising entrepreneurs generally. Which is perhaps one of the reasons why our economy is clearly stangnating. We all need it to grow, for everyone's sake.

In reply to Gaston Rubberpants:

According to the BBC, there's no evidence on this one way or the other. Anecdotal evidence seems quite persuasive when it applies to the rich; less so when it applies to the poor.

I agree that if it could be shown that we would all be better off by scrapping it, then it should be scrapped.

In reply to wayno265:


The problem is that it is almost impossible to prove what we are losing out on by putting up a barrier to people who want to move to or invest in the UK. My own experience strongly suggests that it has slowed down significantly as a result. And that money would not go straight to the bankers or whatever, it would go into the general economy.

In reply to JonC:

You obviously have more direct knowledge of that than me, but it does puzzle me that someone would sit down, come up with a business idea and either say "Sod it, when I'm earning £150k it just won't be worth it" then not bother, or be so rootless that they float around the world attaching themselves to the current lowest taxing economy. I'm sure I'm looking at it too simplistically.

In reply to Sam_in_Leeds: 'I don't trust the government to provide anything for me...

... other than police, defence, infrastructure, (although Thatcher sold it off, the govt still has an obligation to ensure it's provided), education, (for when some poor sap finally agrees to propagate your feeble genes), healthcare (if only to ensure you don't catch infectious diseases from less enlightened proles like me, and also to deal with your pathetic carcass if/when you succumb to some dread disease like cancer which your policy excludes), trading standards ... and at the other end of the spectrum, you get representation in the EU, the UN, International Court of Justice at the Hague, on International Standards bodies (without which your health insurance is worth knack all)...

You've really thought this through, haven't you?

In reply to wayno265: I actually think there's a psychological benefit to it as evidenced by a lot of the reaction to today's letter - lower earners think it's "fair" so they may be less likely to moan about other austerity measures.

Apparently a couple of hedge funds have buggered off to Switzerland since it was introduced, but it's probably too early to say either way whether it'll be a net generator or not - if ever. The trouble with tax bands is knowing when to stop - the marginal rate of tax on someone earning £160k is massive, as they get no tax free allowance, lower levels of tax relief on pension contributions and still pay NI etc etc. But shoud it be 70% on earnings over £200k? 90% on £500k? You have to get to a point of diminishing returns, I'd have thought.

In reply to Rob Exile Ward: Good post. Although you have possibly cued a load of very popular "the police are all corrupt" and "I didn't vote for war" responses with your first twenty letters or so, let alone the rest of the sentence!

In reply to wayno265:

im for it

In reply to wayno265:

Suppose thy already earned 120k in a comfy low risk job or running their own business. Would they take the risk of losing that security, working harder, employing more people etc when the upside is 40% and the downside losing 100%.

In reply to Sam_in_Leeds:


out of curiosity who is your provider?
I dont recall any in the UK providing full A&E services and only a limited subset providing ICU and other services.

In reply to Postmanpat:

and how often would the extra 10% make a difference. Though i may be wrong most people i know in that position started on their own for reasons other than money, as you say it's a big risk to leave a comfy job and though the potential to earn more i'm sure would factor in, other reasons such as control over one own destiny and freedom to work how they wanted were the over riding factors. Like many others i am unsure about the tax changes, if it isn't clear cut that it would defiantly boost the economy i would be tempted to keep it. Though i don;t agree with the sentiment a large propotion of the country feel that they are the only ones suffering, and the abolition of the 50% rate would be more evidence to tie in with bankers bonus etc etc and possible further fracture society for a potentially small boost in GDP.

In reply to Postmanpat:


i do wonder if there is a breakdown of these high earners who are actually self employed as opposed to employees (up to and including the average chairman/directors)
While the normal claim is of entrepreneurs deciding sod it I dont know any self employed bods who would rate their chances of hitting that threshold. Even if they do do well then its more likely to be sold on and hence fall under different tax arrangements.

In reply to wayno265:
I'm against it. It's just penalising folks for being successful. They paid enough beforehand.

In reply to joey82:

Politically speaking it would be nuts to cut it now and unlikely by itself to do enough economic good to make it worthwhile.

In reply to dissonance:


See my view above but the point is not just about the number of people who will actually get to £150k but the larger number that would aspire to were it worthwhile.

In reply to dissonance:
Well yes, also most people i know who are self employed and in that tax bracket don't pay anywhere near 40% tax let alone 50%, so i think the entrepreneur argument is slightly over stated, however i can see that firms maybe less likely to open new offices in the UK if the staffs effective pay would be less in the UK then other EU countries.

In reply to Postmanpat:


If someone was earning 120k then to be honest it probably doesnt make much monetary sense at either the 40% or 50% bracket unless they are confident of earning way above 150k and even then it doesnt really add up.
Now there could be an arguing for giving tax breaks to people setting up companies but a)there are already tax advantages and b)it then gets abused.

In reply to wayno265:


Yes, I'm afraid you are. You're thinking about someone on the borderline. I'm talking about people with serious money investing in property and businesses with very big income streams. If you are thinking of whether it's worth investing in something, you look at the after tax return. So, yes, people do decide where they invest based on the fiscal regime of various economies. Although the technicalities are different, you will be affected whether you actually become tax resident here or not. I am helping a couple of clients with precisely that at the moment.

On the plus side, we have low asset values and a relatively weak £ (compared to some currencies) at the moment so some people do see investment opportunities here anyway.

One of the better things this gov't is sneaking in under the radar is allowing non-dooms (ie. foreigners living in the UK) to invest in UK business without triggering a tax charge on remitting the funds to the UK. This comes in wef 2912 and I have clients who want to take advantage of this and wouldn't otherwise bring funds into the UK. This is a good thing, even though it does benefit the hated "non-doms". If they have no incentive, the money stays offshore and not in the UK. Simple really.

In reply to Postmanpat:

I think that is the crux of the matter. It's not the numbers it's the fact that it's an aspiration killer. No aspiration - no wealth creation. No wealth creation - no recovery.

Al

2012 clearly... And I have no idea why my predictive text keeps wanting change non-doms to non-dooms

In reply to andy:

Interestingly, in the USA it's the poor who feel the worst about high taxes on the wealthy - "If I made a million bucks a year I wouldn't want to pay taxes on it"

Completely ignoring the fact that their income is so low that they only pay sales (like VAT) and social security (like NI) taxes (about 12% of income, give or take). Plus a bit of property tax that's included in their rent.

In reply to Gaston Rubberpants:
it's an aspiration killer. No aspiration - no wealth creation.

Doesn't seem to stop Swedes and Norwegians from trying to succeed.

In reply to pneame:

Arguable.Norway has a huge oil income which finances their welfare state etc. Much of Sweden's corporate wealth is generated and owned by a few families who either live overseas or benefit from huge but little publicised tax breaks.

In reply to JonC:

It's certainly not great that the UK is now seen as one of the highest taxed economies in the world

?

Corporate taxation is crazily low, and given our poor tax laws, loads of companies effectively pay no tax at all.

In reply to Postmanpat:
Point.

But I think that even so, you aren't going to find many people who earn money at a level that gets taxed at a 50% marginal rate who say "well that's it. I'm not going to do any more work this week/month".

On the other hand, they may move. But quite often it turns out that there are hidden costs associated with moving to a place with a lower tax rate (hire bodyguards, bribing people, perhaps).

In reply to lowersharpnose: Absolutely, the government and HMRC should put the effort into closing the ludicrous tax loopholes which allow fabulously wealthy people to earn millions and pay less annual tax than a hospital porter.

In reply to wayno265:

For.

In reply to wayno265:

I found it interesting that the 20 people who wrote this letter, sent it to the Financial Times, who are owned by a company called Pearson PLC.

Pearson PLC feature in this weeks "tax dodging" section of Private Eye, for using a loophole that was closed under the previous government for being "highly artificial tax avoidance"

"The partnership itself lends $497million to the US company, on which it receives around $40million a year in interest. The idea is that, by exploiting a loophole in laws that should exploit profits being stashed offshore, this interest gets a tax break in the US, but isn't taxed where the money originates, ie in the UK."

Pearson are allegedly starting to put aside some money to pay their tax bill because of the loophole being closed, but are challenging whether the loophole can be closed as the legislation may not be compliant with European laws.

Anyway, the point of all that is that if we - that is, the whole G20 and all other economies - get rid of all the "offshore" loopholes and other tricks that massively rich multi-national companies use to get out of paying their fair dues, then the normal top rate of tax could very probably be dropped to 30%, never mind 50%


But I see that the government has put the woman responsible for Cadbury hardly ever paying any corporation tax into a Treasury Committee looking at making anti-tax avoidance laws more business friendly.

In reply to Dominion: It's just like when Gordon Brown put Philip Green in charge of looking at how to improve HMRC.

This is the man, who thanks to the 'non residence' tax loophole, trousered a billion pound bonus, but because it was paid to his wife, who is a resident of Monaco, didn't pay a single penny in tax!!!

In reply to wayno265: 100% for. After all this coalition keep reminding us 'we're all in this together'. It would seem some of us are more 'in it' than others.

In reply to Dominion:

A bit like the good old Grauniad then?

In reply to Goucho:

Now i know you don't like people pointing out inaccuracies in your posts, but Philip Green was advising the current coalition on reducing waste across the civil service, not Brown.

In reply to pneame:
Not in so many words but I suspect many will ease off a bit. By the way, in reality the State ends up taking about 62% over £150k.

In reply to Postmanpat:

I suppose so, however, the irony I was trying to highlight was that the letter was sent to the tax dodging Financial Times, and if companies like them didn't use tax avoidance dodges, then there would probably be no need for a 50% tax...

In reply to andy: I stand corrected. But hopefully my point remains intact.

In reply to Dominion:

Depends whether the "need" it satisfies is economic or political. I think it's far more valuable as the latter - you can see from lots of posts above that "squeezing the bastards" is popular with almost everyone, regardless of whether it actually raises any money.

In reply to andy:

Er,so is capital punishment. The decision is whether on balance the votes gained by "squeezing the bastards" are more than those gained by the positive impact on the economy of lowering the tax rate. My guess is that in the current climate probably not.

In reply to Postmanpat:

Is that assuming that they pay VAT on money they don't spend? Or is it NI?
In reality, the rich pay less tax on their income because of (1) favourable treatment of capital gains and (2) they don't spend everyting they earn (and so don't pay as much VAT)

In reply to Postmanpat: Just replying generally, so twenty top economists thisnk the 50% tax rate is damaging.............. well sorry but 20 million plus think it is fair and as we live in a democracy stuff those who don't like it and govern for the majority. What I am in favour of is a high tax rate for those 'earning' over 250k pa, what about 70%

In reply to Postmanpat:

Don't disagree - i do wonder whether this has a knock-on economic benefit of allowing the rest of the economy to be squeezed harder because it makes the majority more willing to put up with other measures because the aforementioned bastards are being squeezed in such a public way.

In reply to Allan McDonald (Gwydyr MC): Presumably, that's 20 million people who don't have to worry about paying it!

It's so easy writing cheques from somebody else's bank account isn't it

In reply to pneame:

Mainly NI.May include council tax.

Of course they pay more although they will often pay a smaller proportion because of VAT.And of course unless their cash earns no income or capital gains they will tax on that.
The top 1% pay a quarter of all income tax and the top 10% pay 50% of it.

In reply to wayno265: Sorry for the fact that I haven't read the thread, but the interview on PM was telling. To summarise (more sophisticated interpretations welcome):

a tax research expert who's probably a lefty says "if you look at the evidence, it is clear that investors and entrepreneurs don't move away to avoid the 50p rate, and overall the UK offers a good tax deal to business compared to other similar countries such as Switzerland; and cutting tax for the rich now is absurd given that we need the both revenue and economic stimulus, so easing the tax burden on start-ups and consumers would be a far better idea"

a wealthy business bloke in the property trade who's probably a tory says "us rich business guys are taxed too much. I can't give you any examples or evidence, I just don't like paying tax"

The last people I'm prepared to listen to these days about how to run the economy are tories and economists (economics is the only 'science' which is consistently proven to have almost no predictive power). The advice of 20 tory economists which says "tax the rich less" is worth less than its weight helium, frankly.

In reply to Allan McDonald (Gwydyr MC):

Seems odd to want both to reduce tax revenues and make most of the population worse off but as you say, it's a democracy; sort of.....

In reply to Jon Stewart:
I turned it off the discussion was so badly framed.Crap radio. The emigration thing is mostly a straw man. Sure, some people will leave but the real issue is the impact of disincentivising those who stay and the cascade effect downwards of that.
It's pretty clear that high tax rates reduce tax revenues. The difficulty is calculating where the optimum rate lies.

In reply to Postmanpat:


Absolutely. But the idea that the 50p rate has conclusively tipped it over and needs immediate change is a right load of old arse. What would happen is we'd have less a bit less revenue, a few happier tories and no evidence about what it's done for growth.

In reply to Jon Stewart: To clarify the above a bit, I mean we'd see the immediate fall in revenue as the policy was implemented and whatever happens subsequently as a result of the performance of the economy, no one will be able to show any causality with the policy change (though people will pretend they can).

Sorry if that makes it less clear.

In reply to Postmanpat:

I must be really dumb. How can raising tax rates reduce revenue? Are you suggesting that more people will dodge paying taxes?

Personally i think capital gains tax should be far higher and income tax far lower. The present tax code seems to punish work while promoting speculation.

In reply to wilding:
Some dodge, many just don't bother earning enough to enter a higher bracket etc, etc.
It's a pretty well established pattern but the tipping point us controversial



Capital gains doesn't raise much anyway and it discourages investment at high levels,

In reply to Jon Stewart:


If you read my post above, as someone fairly closely involved with this, that's almost exactly what I said.

I agree, people have stopped leaving the UK over the 50% rate (though don't kid yourself, a lot of people did a couple of years ago), and it is now the time to encourage inward investment and entrepreneurs (ie. Start ups).

One way to do this is to drop the 50% rate and find other ways to encourage people to do all those things. Funnily, most people investing millions in new businesses do have in mind things like post tax returns. They don't do it for the social good, and neither would you if the truth be told.

Whoever said our corporate tax rates are very low is talking cr@p as well. Yes, the headline rates are dropping but a) the range of tax reliefs for corporates is now very low and b) it costs a fortune to extract money to the owners (which at the end of the day is what it's all about). Looking at cross border tax planning now, the UK is put in the same bracket as the US, which is not conducive to attracting investment into the UK.

Or you can believe those like Dominion who believe what the left wing press want you to believe. Commercial reality has no political leaning.

In reply to wilding:


Ok, you're really dumb then of course people will 'dodge' taxes. Mostly quite legally, by deferring realising gains and taking bonuses and dividends until tax rates drop. The corollary is that every time a hike in tax is suspected, it is well known that people actually advance taking profits and pay tax earlier! Every time.


You probably know this but the general argument is that people who invest for gains take a far higher risk tha those who just go to work and have a steady day job. Therefore, income taxes do tend to to be higher the world over. Investing for lomg term gains is not 'speculation'. If you do habitually speculate for short term gain, there is case law and legislation to tax you on profits as income anyway.

In reply to wayno265:

Emotionally, I'm all for the 50% rate, but its worth remembering that the top earners are also the most physically and economically mobile.

I would have thought though, and more to the point, that income tax at that level is reasonably easy to avoid, and all you'll end up doing is getting loads and loads of people doing what contractors already do normally, and avoiding income tax altogether and paying corporation tax, which is a lot lower.

If its easy to avoid, then all you'll get is mass avoidance, and raise no revenue. In which case it appears a little pointless. There's no point implementing something that is trivially avoidable.

Unless its primarily to look and sound good to those who are paid-up members to the politics of envy, and who dislike on principle anyone who earns more than they do. Oh, and if of course, you're a Labour government in search of a few million votes immediately before a general election.

In which case it works well. No-one really gets hurt (becasue they all avoid it) and the crowd who quite like the idea of rich people suffering will vote for you.

Plus you postpone the implementation so it comes in after you've departed so if anyone does get upset its your sucessor government, who then are put in the quandary of either

a) if they try and reverse it of looking like they are reducing taxes when there's a huge deficit to pay off and hence looking feckless to the electorate (and also losing a load of votes when they put through polices which appear to primarily benefit the(small minority of) rich folk, or

b) if they keep it it looks like the tories are attacking their prime sponsors - the rich.

Job's a good 'un. Its quite beautiful really.

I have accused the last government of many things, but stupidity has never been one of them.

In reply to wayno265:
The 50% tax rate is just a gesture to appease the proles. It doesn't raise a lot of money but impacts significantly on those that pay it. Who would want to take on a shed load of extra responsibility at work, merely to find themselves in the 50% bracket? Not me. These people are tax payers anyway, not tax dodgers. They're easy targets for extra revenue and 50% is iniquitous. It's the tax dodgers at all levels that should be targeted.

In reply to John_Hat:

It seems to be raising an addition £1.5bn, suggesting £7.5bn paid in income tax on earnings over £150k, about 5% of income tax revenue, so not insignificant. I don't know how much is avoided and paid at 20-26% corporation tax.

In reply to wayno265: The easy thing to do is say that the income that you earn as a slary on a monthly basis is being taxed at 50% but in reality I suspect that the majority of the 50% will be coming out of the interest on peoples savings and other investments at the end of the year. That's where people will start to look at moving. Why live in the UK and invest in property and shares here when the return isn't as great as somewhere else. Especially if you already own a property here and another abroad.

In reply to Sam_in_Leeds:


What's the difference in work load between my school friend, now Hedge fund manager who became a millionaire several years ago who I've no doubt works hard at betting and me on a £35K science job working hard with long days and in most w/es? Working f*cking hard does not give you some right to insulation from the requirements of the state and it certainly doesn't in anyway correlate with work load, nor indeed some evidence of a sense of responsibility.


As if private healthcare was somehow insulated from the NHS. It isn't. E.g how many privately run ITUs, HDUs, Cornonary care units, medical and surgical admissions units, A+Es, ambulances are there in the UK? Hardly any, and certainly no where near enough to support the other token but highly lucrative aspects of the private health sector. How many doctors have I seen carrying out their private work during their NHS contracted time? Loads. How many privately run services depend on adjacent NHS services? A very high proportion. And then comes the question of the quality of your service - you may get something on demand, but do you really want it? Feel free to go and get your colon perforated in a mobile colonoscopy unit if you want!

In reply to Jimbo W: This is a tricky one, isn't it? With inceasing tax rates on higher incomes then the better paid pay not only more in cash terms but also a greater proportion of their income. I absolutely agree with the principle that those who have more put more in - but that would happen with a flat rate of 20% for all income (and those at the top put in more than they would ever take out).. The idea that those that earn more are not allowed to keep the same proportion of some of their income than others is slightly different - and as Pat says there is a tipping point at which people cease to generate more income for themselves as it's not worth it.

I think that 40% is about right, personally - you get to keep slightly more than half of what you earn above a certain amount.

In reply to Jimbo W:

I think what is boiling my pi55 is the assumption that all the 'talented, hardworking' people earn £150k a year and everyone else is somehow less talented or less hard working.

Or that if said 'talented and hardworking' people decided to leave the country because of paying 10p in the £ more than they used to on earnings over £150k, that the country would go down the pan. What would actually happen is that equally talented and harworking people who weren't as greedy would do the job instead and happily pay the tax.

In reply to andy:

Fairness in taxation means taxing higher earners proportionally more given their greater excess of earnings above reasonably necessary expenditures.

In reply to Eric the Red:
What would actually happen is that equally talented and harworking people who weren't as greedy would do the job instead and happily pay the tax.

The trouble is that isn't true.

In reply to MG:

I would.

In reply to Jimbo W:

a) Not if the jobs were no longer there you wouldn't.
b) You are unusual in that case.
c) You are probably not capable of doing the jobs than pay so highly.

In reply to Jimbo W:
I would

In reply to Eric the Red: If you have an ISA or pay into a pension, then I struggle to believe you wouldn't do other things (like move abroad) to avoid tax if the option was available to you. If you do neither of the above then I believe you, but think you are a bit odd.

In reply to MG:

Hmm - on that last point - I wonder how much of the UK's economic growth is created by people who earn less than that?

It very much depends what sector you're in as to what 'top' salaries are likely to be, and whilst it's obvious that money begets money so that finance industry wages are higher than in other sectors, it would be strange to think that only a sector where top wages are that high is stimulating growth and benefiting the country as a whole.

(not sure that makes sense - might have to ponder futher and revise).

In reply to MG:

Er, I see my life as a bit more rounded than how much tax I pay.

I'd love to live and work in another country, but I'd do it because I'd like to experience it. If I thought I'd be happier, I'd move abroad and I'm sure how financially secure I'd be would be a factor. What I definitely wouldn't do is move my family and life to another country to save 10p in the pound on anything I earned on an amount that made me already very comfortable.

By the way, I have an ISA. Not sure how that's equitable to throwing toys out of a pram and moving to Switzerland. I have a pension, it's a public sector one, again, not sure how that's equivalent to a banker's arrogant hissy fit.

In reply to Tall Clare:
it would be strange to think that only a sector where top wages are that high is stimulating growth and benefiting the country as a whole.

I don't think anyone is suggesting that (probably the opposite right now) but nonetheless dioscouraging high earners from living here, and probably bringing other lowerpaying jobs here too is surely a bad plan? Particularly when the tax raised from high tax rates is so small.

In reply to Eric the Red:

>

Fine, but in that case you are not typical of high earners.


Because you are arranging you life to pay less tax. Just as Mr £XXXXX is by moving to Switzerland. If you expect him to pay more tax by staying in the UK, why aren't you doing so by not using an ISA.

In reply to MG:

I tend to think that the super-rich have ways of managing their finances that mean their tax exposure is minimised, and on that basis encouraging a larger section of people to be just under the £150k threshold, so we have a bigger pot of 40% tax opportunity, seems logical.

In reply to wayno265:

Possibly a 50% rate where you paying more in tax from your income than taking home (don't forget NI etc) is some sort of psychological tipping point.

One of the effects of the current tax regime, apparantly, is that financial companies/expertise in the city will/are moving to other financial centres around the world. There is a worry that somewhere say like Singapore will become THE place to do business rather than London. There is incredulity that government are maintaining a policy that may damage one of the UK's leading industries, and lose all that tax revenue from companies and individuals.

In reply to Jim Hamilton:

This is a dumb question but please humour me: If the government are basing their budgets on the 50% tax rate being in place, and they then remove it, where will that revenue then come from?

In reply to MG:


My friend created his own job by creating his own asset management company with three friends.


I really don't see why. I just want to work hard and earn a bit more.


Why so? I have as good A-levels and as relevant a degree as my friend: medicine, and biochemistry to his chemistry. Achieved more highly than him. First class honours to his 2:1. He learnt his business on the job in Deutsche asset management. I really don't see why I couldn't!!

In reply to Jimbo W:

Hmmm... Is it? This is one of those things I'm not sure what my opinion is! Taken to extreme it becomes wealth redistribution pure and simple (the 95% rate my mum's GP boss paid way back when was the government's way of saying "you don't need this money so we'll take it off you") - i think i think (!) it's reasonable to tax part of some high incomes at a higher level, but there does come a point at which it seems unreasonable.

In reply to Jimbo W:


Right, so he moves to Switzerland and takes himself and 3 friends with him, thus depriving the UK of all that tax. You now need to set up an equally succesful hedge fund here to replace that tax. Get to it.


As does pretty much everyone. Note the "bite more" that is why 50% tax discourages people from staying here.


Go on then, become a hedge fund manager and stop moaning on here about how little money you have (you still won't have much time). The fact you haven't done so yet suggests to me you can't. Not necessarily intellectually can't, but motivationally, or in terms of focus and drive, and, bluntly, the desire to have loads of money.

In reply to wayno265: Im self employed, in the past I have earnt the sort of money that would require the 50p rate.

However, I am able to decide how much to bonus myself, under the current tax regime I might as well retain the extra in the business and pay it to myself at a later date when the tax rate has dropped or I exit the business.

Theres always a tipping point where the tax rate rises too high and tax receipts actually drop off. This is a fact, those calling for 83% or whatever are fools, overall tax receipts drop during periods of ultra taxation such as this.

were probably right at the limit of that tipping point now i would say.

In reply to MG:

Are you REALLY equating a small ISA with moving to a different country?

REALLY?

It's just arrogance of the people in these jobs which makes them think a) they're worth it and b) they're better than everyone else and obviously work much harder.

In reply to Tall Clare:

But they don't really know how much they'll get - there are a pretty small number of people paying 50%, and the extra tax take on that is expected to be (say) £1.5bn. However there's another £6bn of "normal" tax on that money anyway (ie the 40%). In the population of 50% payers there's likely to be a really small number of really high earners who contribute the majority of the £7.5bn - and these are probably the most mobile. If a relatively small number of them buggered off (and as Jon C says some already have) then the overall tax take from this group could actually go down.

In reply to Eric the Red:


Agreed - if we lived in a meritocracy then one *could* argue that nurses, care home workers, etc should be our higher earners and that people pushing money around would be lower down the earnings list.

In reply to andy:

Thanks for that, that makes sense.

(Sorry everyone - I find it more useful (for me) to use threads like these to ask questions than offer opinions, as there's lots I don't know)

In reply to Eric the Red:

Conceptually they are identical yes.



I agree.

Now, do want them to stay here and pay tax or would rather Switzerland got it because you don't like arrogant people.

In reply to Tall Clare:

Well i suppose they would further reduce state spending, tighten tax loopholes ? 40% of something is better than 50% of nothing.

In reply to MG:

There are 2.5 million unemployed people in the UK with a high number of good quality graduates looking for work. I reckon we can fill these posts if they leave.

"WAAAAAAH, YOU CAN'T MAKE ME MUM! I'M RUNNING AWAY, I MEAN IT..."

High earners echo my 6 year old nephew shocker.

In reply to Jim Hamilton:
I think that is spin.There are always people moving to/from places like Switzerland and other areas in Europe. However London has a dominat position across all financial services - legal, insurannce, shipping etc etc- which is unrivalled. Granted the banks are in such a mexx that it will take years for them to deleverage, bit that is another story.

Personally the faster they drop this tax the better. It's been well proven over and over again that the lower the tax rates you have the more tax you earn.This is becuase people will staop trying to avoid paying it. A single flat tax band is really the way forward.

In reply to fxceltic:

I'm in the same place; I was fine with a 41% marginal rate (including NI), but a 52% rate - when over half my last pound of income is taken in direct tax before I have chance to spend it on something which is then usually indirectly taxed - is a step too far. I've given up an additional part time job - so no tax receipts from that any more - and I'm not drawing most of my main salary - so no tax on that until sometime in the future when the rate is lower or my total earnings are less. My ability to legally avoid tax is far more limited than many in the 52% tax band, so I doubt it's raising much.

The 50% rate was simply imposed by Labour to give the Conservatives a problem to deal with, it was never (IMHO) a revenue raising measure.

In reply to Eric the Red:

And if the posts leave with them?



To repeat, do want the tax or not. Do really want to it to go elsewhere so you can feel you really stuck to some arrogant rich people?

In reply to Eric the Red: I'm not sure that the risk (and I'm not saying it's real) is not that the people go but they and their jobs go - i don't know what the distribution of the tax take above £150k is, but I suspect there's a bunch of normallyemployed people who are lucky enough to get up to (say) £200k a year in a good year. The additional tax they'll pay is £5k. Not worth leaving the country over, and they're probably easily replaceable with one of your good quality graduates anyway (well they're not, but they're replaceable). They carry om as they were, grumbling but comfortable. I bet we all know a few of those.

The problem comes (theoretically) when a firm that has people earning £1.5m who take the firm and all its jobs (including the jobs of support staff who earn less) to Switzerland - that doesn't leave a bunch of highly paid vacancies - it leaves a hole in the tax take and some unemployed analysts and secretaries.

In reply to Eric the Red:
It think you may have nailed most of the whiners with that post; my bro in law is exactly like that, he's going feckin' nowhere.... I think the 50% cost's him roughly an extra £800 per year, not even paying for the flight to the green grass on the other side low tax heaven....

In reply to wayno265: I'm Against it. I think tax policy in general in this country is grossly unfair. The simple fact is no one just gets given a job that pays well. you need qualifications, you need experience, and most importantly you need to be good at what you do.

Talent goes to where the money is. If talent is going to be hit with 50% tax then its going to f*ck off somewhere else.

Tax in general in this country is extortionate - im a base rate taxpayer - earnings under £20k per year, i drive a car and lead a modest lifestyle, and i worked out last year that i pay 62% tax. Factor in fuel duty, council tax, road tax income tax, national insurance and VAT.

what would actually be fairer is a flat rate of tax across the board, with a higher rate for those over £250K per year. abolish vat, car tax etc. While your at it cut back on public spending too - starting with the benefits system which frankly is ludicrious - i signed on for a month a few years ago), and saw people i knew from school who had been signing on (on and off) for 8 years. if there to stupid or lack the common sense not to walk out of jobs or to repeatedly get sacked then im sorry but why should i pay for them.

In reply to wayno265:

Against it. With VAT, petrol, fags and booze we get taxed up our arses in this country.

In reply to Removed User:

He will have lost his personal allowance also, which will be costing him another £4-5k and is paying 1% extra NI, so at least another £1.5k. Maybe not enough to make him reconsider - but certainly more than the £800 you estimate.

In reply to wayno265:
I am against it because I think it will raise no more money, may even cost jobs and raise less money, and is more about politics than the finances of our country.

In reply to Removed User:

More or less what I said - but I bet your b-i-l and people like him aren't really contributing much of the extra £1.5bn - they're probably feeling very glad to have a well paid job!

In reply to pneame:

I work as a limited company. I'm not approaching the 50% tax threshold but certainly not interested in paying tax at 40% level so I just work less and stay within lower limit. I did live in France for 10 years too - mainly 'cos the hills are better but lower tax was definitely a nice bonus and I know plenty of people in my business who do the same for tax reasons.

Most people don't mind paying reasonable taxes but will take often dubious steps to minimise their tax bill when it is considered onerous. I have worked with several fierce socialists who do so as well - heart is on the left but wallet is on the right!

In reply to Shirebikes:


Does it f*ck. Tell that to the numerous science graduates who have excellent academic credentials, BScs, PhDs are highly talented, skilled, and operate in a competitive hard working environment who are afforded low wages 3 year contracts and cut throat job security. Why do these people, in many cases doing beneficent directed work, deserve any less than a fund manager, with not better academic credentials, betting with other people's money?

In reply to Jimbo W: im not sure this comment makes any sense.

I also dont buy that argument about nurses etc, as while there is no real doubt that the job function of a nurse is more worthwhile (in isolation) than say a fund managers, thats not the issue in question.
The fact is that some people do earn more, regardless of what they do, so the question is whats it fair to tax them, the answer is "as much as they will stand" it seems.

I'd stake my life on the fact that even if Nurses were well paid enough to hit the 50p bracket, that a f*cking massive % of them would be unhappy at how much tax they were paying. Its human nature, regardless of how worthy your job is deemed by everyone else.

In reply to Jimbo W:


I think that this misses the point. Employers don't pay people well based on how good they are or how 'deserving' they are. They pay what they can get away with, to get the right person and to keep them.

Most people who go into science, do so because they enjoy the work, find the working conditions amenable or simply have a real passion for the subject. In short, the rewards are not financial, and the employers know that. In other professions, that may not be true.

As such, you are probably right that money doesn't follow talent, but that doesn't mean that currently well-paid jobs would continue to be done well if the money wasn't there.

In reply to wayno265:

It's a red herring, populism only. The 50% band generates a small fraction of sweet fook all in tax revenue. Also, you wouldn't be earning £150k+/pa if you couldn't work out how to avoid paying tax on your income anyway.

It's purely a vote grab - TAX THE RICH - that (as is evident here) will probably play well in certain quarters.

It's just that the rich won't really notice.

In reply to wayno265:

It's worth bearing in mind that the top 1% of earners in this country pay approximately 28% of the total income tax. These are people that we really don't want to be peeing off, we want to be encouraging more people in this bracket into the country which just isn't happening.

A large number of the companies and employees could fairly easily move their operations abroad to save money. Worse case scenario if they keep getting taxed to the hilt is the UK could lose a large proportion of its income tax through relatively few people going elsewhere.

In reply to Markel:

That's not true. Scientists earn peanuts because they aren't valued enough. Of course, they could always go and get another job... oh, they do. In finance, earning shedloads.

In reply to Eric the Red:

I tend to think that money begets money, so anything where you're generating or protecting money will earn you more than working in other sectors might.

In reply to Eric the Red:


Well, I am a scientist, and I genuinely don't feel undervalued. It's true that I have to work hard and don't get paid a huge amount for my qualifications, but on the other hand, I feel my work is valued by the end users, I am given a lot of freedom and a comfortable living wage.

It's true that some scientists realise after a few years that money is of more importance to them than they thought, but from my own experience, that is a small minority.

In reply to fxceltic:

True dat

In reply to Markel:


So you are presumably one fo the ones who is arguing that high earners in the financial industry have been doing a good job over the last 10 years?

In reply to wilding:

That is not his argument at all. Even at a 40% tax rate they are still paying for the NHS like everyone else. The difference being, they still pay more in tax but are LESS of a tax burden themselves.


I am against the 50p rate. The 'tax free day' in the UK is one of the worst in the world. Someone at the £15ok a year level can work almost anywhere. Many would not move because England is home, many would, taking with them any onward investment they may have in companies and taking away their tax revenue. It's short sighted and unfair. You do not have £150k job for no reason. With the money comes responsibility.
Even at my leve (much lower) I have people telling me how easy I have it. Funny, these are people who leave work and forget about it, people I myself protect from the everyday pressures of deadlines so that they have a pleasant environment to work in.
But I apparantly 'have it easy' because I take more money for the priviledge of the responsibility.
Not forgetting the work I put into training etc to get and maintain my position.

In reply to Jimbo W:

are you arguing that NOBODY in financial services has done a good job (in terms of their job description, not your subjective opinion)?

In reply to fxceltic:


No, exceptions exist, but their sum activity has been economically destabilising and required huge dependence on the tax payer.

In reply to Markel:

95% of post docs are not able to continue in primary research. The vast majority don't get to pursue they're primary motivation or the financial benefits of their academic investments. Some are forced, like my wife, to pursue careers in industry, and a significant majority end up doing something completely different... ...or so our internal careers advice department informs us. You are either early in your career, or one of the lucky few.

In reply to Jimbo W:



Yes, science is intensely competitive; I wasn't disagreeing with you about that. It is competitive because a lot of people want to do it.

My point was that people are driven to succeed because they see a reward. The rewards are not financial in all cases.

I don't know whether most (or even any) high earners in the financial services have been doing a good job, that is irrelevant to the point I am making. Their bosses pay them highly, because they feel they need to.

In reply to DNS:
Personal allownace goes progressively in the 100-150 bracket, the £800 is purely as a result of the extra 10%.

In reply to Jimbo W:

exceptions? I'd argue that it was the minority in FS that put us where we are, for the most part the people that work in Banking got on and did the same stuff they always had done.

In any event, bankers are only a % of highly taxed earners, so hatred of them doesnt seem to be a good basis on which to formulate taxation policy.

I work in Canary Wharf in a support role. I earn nothing like £150k. In fact I earn nothing like £50k. There are thousands of us in support roles. This is alos happening in the City.

It's not a case of the English people leaving the UK it's more a case of attracting the foreign banks and people. If a foreign bank has to decide whether to base itself here or in Singapore, one of the factors is whether it will be able to get it's potential workers (from Europe/Asia) to take positions here or whether they would rather work for it's competitors in Singapore. Obviously it's more complicated than that.

But if banks start to locate elsewhere then all the cleaners, delivery drivers, cooks, sandwich bars, restraunts, bars, electricians, plumbers, photocopier engineers, window cleaners, lift engineers, pest controllers etc that are employed will not have jobs.

In reply to andy:

He'd get less than half that outwith the M25 and he knows it.....
Fair play to him he's getting it but there is a huge amount of shrill bollocks attached to this.

Me, I'd pay it in a minute, I love living here and feel that if I'm a success the UK is partly due to that. I've had the benefit of a great free education, free healthcare, had mates supprted by the welfare (workers, not scroungers and are back on their feet as the cycles go round).

Problem we have in this country is everybody wants German services on American tax, not happening.

In reply to wayno265:

For. There is no real dis-incentive at that sort of level as the potential for increasing earnings is huge, just as the possibility of skilful, butprobably legal, tax-avoidance. too any people on this thread are applying low-pay attitude to a high-earning situation. The 50p threshold exists, this is about removing it, not introducing it. There has been no mass migration because of it. If HMRC could only actually do their job properly the UK might actually recive the tax funds it's entitled to. If memory serves, someone like that Al-Fayed actually negotiated his tax liability. He offered a figure which HMRC could accept if they thought it was reasonable. This they did as they could not calculate what he actually owed as it was "too complicated" for them. See also this guy :http://www.guardian.co.uk/uk/2002/apr/11/politics.economy

Although the story is old it does go some way to show that the seriously rich don't really pay what they should as there are (or at least were) so many loopholes that could be exploited.

In reply to MG:



If I got paid what Fred Goodwin got paid then I'm sure I would be capable of losing just as much money for the company!

I suspect that the people who are most affected by the 50% rate are those who are in that tax bracket but aren't earning enough to get in the fancy accountants to reduce their tax to an effective rate lower than the average worker pays. I.E. getting rid of tax loopholes could do more to restore any perception of "fairness" in the tax system than adjusting the top rate - assuming that the tax dodgers don't leave the country once they are brought to book.

ALC

In reply to fxceltic:


No turkeys vote for christmas, so the "as much as they will stand" argument has to be nonsense. What its fair to tax them is what is reasonable in a meritcratic society, which I certainly believe in. The answer to that the balance of earnings and taxation is even across those of comparable ability and responsibility.

In reply to PeterM:

For the Al Fayed example I gave above above:
"The dividing line is illustrated in the Al Fayed case,(101) where it was accepted that HMRC had power to forgo the collection of the full amount of tax due , taking into account the difficulties of assessing accurately the
total amount, but no power to accept an advance assessment of liability. Thus an agreement in respect of past tax due was valid, but an agreement in respect of forward payments was ultra vires and so could not be the basis of a legitimate expectation claim."

Taken from http://denning.law.ox.ac.uk/tax/documents/WP1022.pdf

In reply to Jimbo W:
The answer to that the balance of earnings and taxation is even across those of comparable ability and responsibility.

Eh! So you are saying a really rich person who is thick and has no responsiblity should pay little tax?

In reply to MG:

The opposite

In reply to Jimbo W:

Well that means a thick toilet cleaner pays a lot of tax. I think your system is bonkers and totaly unfair.

In reply to MG:


No, because when I said:
"the answer to that [is that] the balance of earnings and taxation is even across those of comparable ability and responsibility"

You chose to interpret that as:
"the answer to that is that the balance of earnings is even across those of incomparable ability and responsibility".

In reply to Jimbo W:

No I did not. I gave as examples two people of low intelligence and responsibility (unless you count toilet cleaning as an area of high responsiblity). Your claim is they should both pay the same percentage of tax. I say this is bonkers.

In reply to andy: As someone who is in the 50% bracket, I totally agree. I much preferred 40%.

In reply to Michael Woods: Ah, but are you leaving the country or grumbling and staying?

In reply to wayno265:

I have done my best to skim through this topic, and it seems that everyone has an opinion, backed up by very little data.

The Treasury carried out some budget modelling, and decided that, TAKING BEHAVIOURAL CHANGES INTO ACCOUNT, tax revenue would increase by £1-3BN each year, if we keep the 50% rate as opposed to dropping it to 40%.

Grauniad article here: http://www.guardian.co.uk/politics/reality-check-with-polly-curtis/2011/sep...

That holds more sway in my opinion than a bunch of people arguing from ideology, first principles, personal experience or general feeling. I'm for it.

Actual source here: http://www.publications.parliament.uk/pa/ld201011/ldhansrd/text/101122w0002...

In reply to andy: grumbling and staying

In reply to jalien:
Modelling is only forecasting when all said and done.

I am more interested to learn the actual £ it has put into the exchequer.

Whihc is what Osborne has asked the technocrats to find out.

In reply to wayno265:

I would set income tax at 25% but be totally ruthless about making people pay it. Which, in reality, most people would. Just look at the experience in Russia. After the fall of communism they had all sorts of tax rates and couldn't collect it; everyone evaded/avoided it. They set it at 13% and revenue soared. If you look at history, most revolutions occurred because of punitive tax by the state - the first to be guillotined in the French Revolution were the tax collectors. Going further back, the same thing happened in the Peasants' Revolt. And remember, if a millionaire actually pays his/her tax, that's 25% of £1 million which is £250,000. Best to be realistic.

In reply to jalien:
Seems like you did your best to skim though the Grauniad article as well.
The whole gist of the article is that whilst the treasury model forecasts one thing there are alternative models and expert views that disagree.

In reply to neilh:
Of course; we will only get an indication come May 2012 when the financial year is over and the budgets and revenues have been calculated.

To PostmanPat, I'm not suggesting that the Treasury model is the only model or even necessarily the best. But at least it provides some suggestions from (I imagine) fairly robust sources. I am inclined to agree with them, rather than extrapolate my own very limited experience or gut feeling to the behaviour of £150k+ earners nationwide.

Policy generally (in this sort of case where there is a clear goal - i.e. increased tax revenues) should be based on scientific analysis of data, or at least robust modelling of potential scenarios, rather than ideology of individuals or groups, which is what's effectively being argued here.

In reply to jalien:

1. Economic growth is not (and should not be) the sole purpose of economic policy. There are, for instance, significant social (and economic) costs from the rising levels of social inequality in this country. I, for one, would rather live in a marginally poorer but more equal society.

2. Ten European countries have top tax rates at or above 50%. Switzerland is 45.5%.

3. Most people earning 150k are in finance or senior management of large multinationals. It's not clear to me why pension fund managers deserve this amount - paid for in commission from our pensions - for returning no net return on our assets for a decade or more. And the pay of senior managers seems to be more a function of a cosy club exploiting market inefficiencies rather than a direct reward for effort or result.

4. That's not to say people in these industries don't work hard. But no harder than in many other less well paid professions. And as someone who has worked in the financial sector, I can say that a lot of the work isn't particularly demanding. And I'm not sure that it's socially useful to have so many bright minds wasting their lives returning no return on pensions rather than doing something else.

5. It's not clear that this policy is not raising money, despite that fact being much trumpeted.

6. It's not clear that we will lose that many wealth generating entrepreneurs. Has the number of people going to Switzerland actually risen?

7. "And what is the damage to other taxpayers? Lower house prices? More equality and a more just society? More opportunity? Better pensions if they weren’t being continually fleeced by finance? What is it, I might ask?"

(with thanks to Richard Murphy for most of these points, which I have summarised - recommend you read his article - http://tinyurl.com/3jxka5z)

In reply to iceaxejuggler: It's probably true to say that numerically most people earning £150k+ are senior managers in Finance etc, but I think (don't know) that they probably account for relatively little of the expected extra tax take. The senior bloke on £200k pays an extra £5k tax.

However the theory (and I'm not sure whether I agree) is that it's the much smaller number of really big earners (£1m+) people whose organisations will simply relocate as they will be unable to attract them. These people are (arguably) not replaceable, so their hedge fund (or whatever) employer ups sticks and leaves - reducing the tax take from them, leaving no vacancies but also possibly laying off their support staff.

In reply to andy:

Those people will manage to avoid this tax anyway.

In reply to iceaxejuggler:

Another good article here by Simon Jenkins - http://www.guardian.co.uk/commentisfree/2011/sep/08/tax-winners-trickle-up-...

In reply to iceaxejuggler:
Where does your stat that "most people earning 150k plus are in finance" come from. Is this anecdotal or what?

Please provdie the evidence.

In reply to iceaxejuggler:

Not necessarily - it's easier to do if you're self-employed, as you can pay yourself less, but if you're paid a salary plus bonus in the UK, for work done in the UK it's not that easy to avoid PAYE.

In reply to neilh:

I actually said: "Most people earning 150k are in finance or senior management of large multinationals." Do you disagree? Who are the other people earning this amount. ONS data seems to suggest that these are the best paid occupations. For clarification, I meant people earning salaries of 150k and hence exposed to the tax - most entrepreneurs earning more than this will pay themselves above this amount in other ways, relatively few professionals earn above this amount.

In reply to andy:

Sorry misread your last post. You are right that it is harder for people to avoid tax in these companies than if they are entrepreneurs.

Despite a lot of talk of moving overseas there has been negligible action. Only one company that I am aware of has relocated lock and stock to Switzerland, though some have opened offices there. There are a lot of impediments to shifting overseas. E.g. tax in Switzerland is not cheap, not everyone wants to live in Zurich.

I do not see the relocation of some hedge funds as being a compelling case against the tax.

In reply to iceaxejuggler:


Me neither, really - My "gut feel" on this is that people should keep more than half of what they earn, so 50% marginal rate plus zero allowance, plus NI makes this position pretty close to what I'd say is the limit of what's fair.

In reply to jalien:
Good for you but why do you assume that nobody on here has read work by on the subject economists or is aware of other models? Is it just your "gut feel" that the Treasury model is best? It certainly can't be robust analysis of the accuracy of previous treasury models.